Reno Rejects GOP Demands for Prosecutor : Law: She responds to Dole’s suggestion that White House is running case in Whitewater affair. She sees disruption of Justice Dept. probe.

Atty. Gen. Janet Reno on Friday formally rejected Republican demands to name an outside prosecutor to investigate the Whitewater affair, saying it would disrupt and delay the Justice Department’s ongoing probe.

Responding to suggestions by Senate Minority Leader Bob Dole (R-Kan.) that the White House--not the Justice Department--was running the case, Reno said career prosecutors are conducting it and that she has “ultimate responsibility” for its outcome.

But Reno left open the possibility that she might seek court appointment of an independent counsel in the supersensitive case if Congress restores the law authorizing such appointments next month.

The Justice Department inquiry involves the Clintons’ investment in Whitewater Development Corp., an Ozarks mountain property deal formed as a partnership with longtime Arkansas friend and political ally James B. McDougal and his wife, Susan. The agency also is looking into the circumstances of the 1989 failure of McDougal’s Madison Guaranty Savings & Loan, which cost taxpayers at least $47.6 million.

Allegations have been made that Madison Guaranty and McDougal improperly diverted funds from the savings and loan into the Whitewater project and to retire a Clinton campaign debt.

In a separate letter to Rep. James A. Leach (R-Iowa), who also urged appointment of a special counsel, Reno reiterated her position that career Justice Department prosecutors assigned to the Whitewater case had the appropriate power to conduct the investigation.

“No witnesses and no documents are beyond their authority,” she said.

She also rejected suggestions by Leach and others that by the time a court-appointed prosecutor could be named and act, the statute of limitations covering possible violations on the part of any principals in the Whitewater case could expire.

In the 1980s, Congress extended the statute of limitations on bank fraud--one of the laws underlying the probe--from five to 10 years, a Justice Department aide said.

Earlier in the day, White House counselor David R. Gergen decried as “cannibalism” Republican attacks on President Clinton over the Whitewater affair.

Gergen, in a CNN interview, said that Republican charges of a cover-up in the case were “outrageous,” particularly coming while the President was in Hot Springs, Ark., for the funeral of his mother, Virginia Kelley, who died Thursday of cancer.

“Where is the decency that we once had?” Gergen asked in a television interview. “We are tearing ourselves apart. There is a cannibalism that’s loose in our society in which public figures, such as the Clintons, could try to come to this town to do something good for the country and then they get hammered away even though they’re trying to do the right thing.”

Gergen added: “There is no attempt here to withhold documents from the proper investigative authorities, and if it comes to a special prosecutor or whatever . . . I will guarantee you the Clintons will fully cooperate.”

Dole, in a letter to Reno on Friday, suggested that the Justice Department was failing to maintain proper independence in the probe and allowing the White House to dictate the handling of the case. He said the only way to ensure the integrity of the process was to name an outside prosecutor to oversee it.

“Once again,” Dole wrote, “I urge you to exercise your statutory authority to appoint a special counsel to ensure that the Whitewater allegations receive a thorough and independent review. It is in the President’s interest for you to stop hiding behind the fact that the Independent Counsel Act has not been reauthorized.”

Dole suggested seven possible candidates for the job: Griffin B. Bell and Benjamin R. Civiletti, who were attorneys general during former President Jimmy Carter’s Administration; former U.S. attorneys Michael Baylson, Anton R. Valukas and Dan K. Webb; former counsel to President Ronald Reagan, A. B. Culvahouse; and Robert S. Bennett, a top criminal defense lawyer in Washington.

Dole told Reno that “nothing less than your credibility and the credibility of the Administration are at stake here.”

In her letter to Dole, Reno said any counsel she named on her own authority “would not be regarded as truly independent, and would be subject to the same criticisms leveled at special counsel appointed by the previous attorney general.”

She presumably was referring to former Atty. Gen. William P. Barr’s appointment of Frederick B. Lacey in October, 1992, to investigate Justice Department and CIA actions related to the case of $5.5 billion in illegal loans to Iraq by the Atlanta office of Banca Nazionale del Lavoro.

Democrats criticized the appointment, contending that Barr should have distanced the Justice Department from the probe by seeking appointment of a full-fledged independent counsel under the law which later expired.